The Spanish Unemployment Powder Keg

Unemployment in Spain jumped to 27.2% at the end of the first quarter, up from 26.0% in the fourth quarter. A record 6,202,700 million people were registered on the unemployment rolls that have ballooned by 563,200 over the 12-month period. The number of working people dropped by 322,300 over the same period to 16.6 million. The private sector shed 251,000 jobs; the public sector 71,400. Austerity succeeded in trimming the bloated government sector. But instead of picking up the slack, the private sector destroyed jobs almost four times faster!

There were 1,901,100 households where no one had a job, up 72,400 from Q4. A crucial statistic for the fabric of Spanish society: many households are large and multigenerational, with members depending on each other.

In the late 90s, I lived for a while in such a household in Mirasierra, a suburb of Madrid with medium-rise apartment buildings separated by wide streets or pedestrian zones with greenery. The family needed to earn a little cash on the side; that’s where I came in. The father had been a doctor in Santander but had run into trouble. The dapper Señor and I would do the paseo on Sundays. We’d walk in central Madrid from bar to bar for beer and tapas, starting late-morning. Yet, even then, he never told me why he could no longer practice medicine, and why he was spending most of his time stewing at home.

The mother didn’t work. They had four kids. The youngest, who’d spent a year in the US, was still in college. The oldest was in her thirties and worked as a nurse. Their son was an engineer at a consulting firm. The other daughter had a part-time job, split over two shifts at a rental car agency. And they all lived at home to support their parents and their youngest sibling.

The nurse and the son had been living on their own, when the mystery debacle happened to their father. So the parents left Santander and bought an apartment in Mirasierra, large enough for everyone. It was tight, but I have the fondest memories, including the phenomenal lunches in the early afternoon when everyone – they all came home from work – squeezed around the kitchen table that was covered with delicious food. And there was always some chorizo from their family farm.

I was impressed that a family would stick together and commit for a long period of time, not just a year or two. But the kids gave me to understand that this was normal. Only once did I get the feeling that there was also a sense of sacrifice: as the oldest daughter and I were sitting on the balcony, drinking sangria and watching the city lights, she told me in a brief lapse that she’d loved her little place, and that she missed it.

Now there were nearly 2 million households where no one worked. It is shaking Spanish society at its foundations.

The lowest though still astronomical unemployment rates were recorded in the northern regions. País Vasco (Basque Country), on the Atlantic coast on the boarder to France, was the least worst off with an unemployment rate of 16.2%. Andalusia, the southernmost autonomous region, and the most populous one, set an awful record of 36.8%. Powder-keg proportions.

Among foreigners, the unemployment rate was 39.1%. Many of them came from Africa or Latin America to work in the construction sector during the housing bubble. When it burst, the construction sector went up in flames, along with its jobs. Of the Spaniards, 25.1% were unemployed.

Youth unemployment – 25 and under – is turning into a long-term tragedy: it jumped to 57.2% from 55.1% in Q4. They’re the most highly educated generation Spain has ever seen, and the country has invested a fortune in them. Yet many have little chance of starting a career and contributing to the economy. The most enterprising, daring, and desperate, are leaving in search of the greener grass in Germany, Argentina, the US…. A brain drain, but also an energy drain; they’d be the ones to kick-start the economy, if ever given a chance.

The hope is that this fiasco will finally reverse course, that something will click and start a virtuous cycle before the unspeakable happens. But so far, it has relentlessly gotten worse. As time passes, temporary issues become structural, and even more difficult to solve. A mild recovery from this level, while nice on paper, would be imperceptible to the people. Frustrations are rising. And so are the risks to society. All the while, the euro has tightened its stranglehold around Spain’s neck – and one wonders what might come next.

It could come from an unexpected corner: Germany. An insider offered an alternative, a heresy for Germans, an exit strategy if you will, a Plan B…. And he predicted that the euro might not last another five years! Read…. Germany’s Trial Balloon Of A “Plan B”.